Investors, issuers take a breather after heady week for EM; Bancomer, Capex, Canara price

By Christine Van Dusen

Atlanta, March 4 - Emerging markets issuers and investors expressed some fatigue on Friday following a roller coaster week for risk aversion - climbing with the news of increased tensions in the Middle East and then falling during a break in the violence.

"It generally has been quiet," a Toronto-based market source said.

Issuance, which was slow at the start of the week and then got heavier on Thursday, backed off again. And spreads were mostly flat.

"It's been mostly flat, except for Venezuela, which came in a decent bit, probably due to the movement in oil prices," he said.

The JPMorgan Emerging Markets Bond Index Plus spread started the day 2 basis points wider at Treasuries plus 253 bps.

Solid U.S. data

The economic news out of the United States was positive, with unemployment down and payrolls up in February.

"Data release after data release has pointed toward a brisk pace of growth for the developed economies," said Gavan Nolan, an analyst with Markit, in a report. "Leading indicators for the manufacturing and services sectors on both sides of the Atlantic provided further evidence, and today's U.S. non-farm payrolls, where 192,000 jobs were added, confirmed the picture."

"The two forces of rising oil prices and growing economies cancelled each other and left spreads more or less flat on the week," he said.

Bancomer, Capex print notes

The primary market was quiet on Friday, following the Thursday pricing of Mexico-based lender BBVA Bancomer SA's two-tranche issue of notes totaling $2 billion and due 2016 and 2021 via BBVA, Deutsche Bank and Goldman Sachs in a Rule 144A and Regulation S transaction.

The deal included $750 million 4½% senior notes due March 10, 2016, which came to market at 99.285 to yield Treasuries plus 237.5 bps. The second tranche totaled $1.25 billion 6½% subordinated tier 2 notes due March 10, 2021, which priced 98.645 to yield Treasuries plus 312.5 bps.

Also on Thursday, Argentina-based energy company Capex SA's $200 million senior notes due March 10, 2018 came to market at par to yield 10%, a market source said.

Deutsche Bank and JPMorgan were the bookrunners for the Rule 144A and Regulation S notes, which are non-callable for four years.

And India-based lender Canara Bank sold $350 million 5 1/8% notes due Sept. 9, 2016 at 99.56 to yield 5.218%, or Treasuries plus 295 bps, a market source said.

Bank of America Merrill Lynch, Citigroup, Deutsche Bank, HSBC and RBS were the bookrunners for the Regulation S deal.

Lithuania, Akbank in demand

The final book was $5.25 billion for the Republic of Lithuania's $750 million 6 1/8% notes due March 9, 2021, which came to market this week at 98.172 to yield 6 3/8%, or Treasuries plus 294 bps.

BNP Paribas and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

About 64% of the orders came from the United States, 19% from Europe, 16% from the United Kingdom and 1% from others. Asset managers accounted for 82%, banks 11%, insurance and pension funds 4% and hedge funds 4%.

The recent $500 million 6½% notes due 2018 from Turkey-based financing company Akbank TAS - which priced at 99.656 to yield 6.562%, or Treasuries plus 360 bps - had a final book of $950 million, a market source said.

Citigroup, Credit Agricole, HSBC and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

About 38% of the orders came from the United States, 25% from the United Kingdom, 14% from the Netherlands, 10% from France, 6% from Switzerland and 7% from Europe. Funds accounted for 62% while banks were 18%, insurance 13% and private banks 7%.

Sumatera, Mongolia plan deals

In deal-related news, Indonesia-based Bakrie Sumatera Plantations Tbk., a producer and marketer of natural rubber products and palm oil, is planning a $200 million issue of three- to five-year notes.

Credit Suisse and Deutsche Bank are the bookrunners for the deal.

Proceeds will be used to refinance the company's $185 million 10¾% notes due 2011.

The Mongolian People's Republic is planning an offering of $500 million bonds, a market source said.

Issuance is expected to take place this year.

And Bank for Investment and Development of Vietnam (BIDV), a Hanoi-based state-owned commercial bank, is considering a $500 million issue of notes, a market source said.

The deal is expected to price sometime in 2011.

Pemex on tap

The Toronto-based market source was keeping an eye on Mexico's Petroleos Mexicanos SAB de CV, which is planning to issue up to $3 billion in two or three tranches of notes.

The state-owned petrochemical company recently completed a non-deal roadshow with JPMorgan and Goldman Sachs and is expected to launch the new issue as soon as May.

"Some of the things they announced in the Pemex presentations they gave earlier in the week were quite positive. They said some good things about projects they're planning. They're having some success in developing new fields and new projects," the source said.

He's not sure whether that means the deal will be well received, though.

"It's a hard call. It's too early to make a call on that," he said. "Much depends on whether they come in with a concession. They're usually quite good issuers, and usually their offerings go well."

Trading flat; flows down

In trading on Friday, Bahrain's 2020 notes - which were seen at 92.25 bid, 93.25 offered on Thursday - were trading at 92.50 bid, 93.25 offered on Friday.

And Qatar-based Qtel International Finance Ltd.'s 2025 notes were seen Friday at 87.50 bid, 88.25 offered after Thursday's 87.37 bid, 88.12 offered.

Meanwhile, emerging markets bond funds saw outflows of $4 million for the week, according to data tracker EPFR Global. That compares to the previous week's inflows of $96 million.

"In both weeks it was very close to an even split of flows into local currency and blended funds and outflows from hard currency funds," said Cameron Brandt, senior analyst with EPFR. "They're way off from the rivers of money that have been flowing into these funds over the past year or so."

To blame are the ongoing tensions in the Middle East, the weakening dollar, rising oil prices and inflation concerns.

"With this level of flows there's a certain hunker-down-and-wait-and-see quality to them," he said. "There are a lot of good reasons to wait and see at the moment."

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